NZ dollar falls on weak data, then recovers

The New Zealand dollar fell after weaker than expected retail sales data suggested interest rates will stay on hold for longer then recovered as the US dollar fell and Singapore moved to widen the band its currency trades in.

The NZ dollar was at US76.14c at 5pm, little changed from US76.17c at 8am and up from US75.68c at 5pm yesterday. It fell from just above US76c to US75.65c on the retail sales data.

Seasonally adjusted retail sales edged down less than 0.1 per cent in August from July, Statistics New Zealand (SNZ) said.

Core retail sales, which exclude the vehicle-related industries, were down 0.6 per cent following a flat month in July. Fifteen of the 20 industries in the core retail group recorded decreases in August, SNZ said.

Dealers said the 0.6 per cent fall in the core figure was bigger than the 0.2 per cent the market was expecting and it became the main focus for traders.

"The Reserve Bank of New Zealand (RBNZ) highlighted the weakness in household spending in its September Monetary Policy Statement, and today's data certainly indicates households remain cautious in regards to spending," ASB said.

"The weakness in August retail sales reinforces our expectations the RBNZ will hold off increasing the official cash rate until the March 2011 meeting."

The NZ dollar had peaked near US76.35c on Wednesday night, according to Reuters data.

Mike Jones, strategist at BNZ, said the local currency rose again in afternoon trading after government financial statements for the year to June 30 were slightly better than expected and after Singapore widened the trading band of the Singapore dollar. The Australian dollar was also strong today and is approaching parity, sitting at US99.55c at 5pm from US98.75c at the same time yesterday.

"Asian currencies pushed higher and the aussie dollar is closing in on parity," he said. Equity markets were also firm in Asia today.

The NZ dollar was A76.43c at 5pm from A76.68c at the same time yesterday. It was at 61.86 yen from 62.30 yen at 8am and 61.95 yen at 5pm yesterday.

It eased to 0.5411 euro from 0.5458 euro at 8am from 0.5422 at 5pm yesterday. The trade weighted index was little changed at 67.17 at 5pm from 67.14 yesterday.

- NZPA